Crude Futures Climb With Confident Consumers

Crude futures are recovering from yesterday’s pullback which saw the futures testing the psychological $70/bbl level and our 2^nd tier uptrend line.  The futures are now battling with our 3^rd tier uptrend line, which presently rests just below previous June highs.  Crude is reacting positively to the better than expected economic sentiment data from the EU.  Economic data from the EU has been coming in mixed over the past month and a half, including last week’s light showing from industrial production.  The EU continues its mixed performance today by releasing an economic sentiment number the likes of which have not been seen since May 2006.  As a result, the EUR/USD is experiencing some much needed relief, boosting crude since it is a Dollar-based commodity.  A confident economy implies a confident consumer which could help boost production and consequently consumption of crude.

Investors are now awaiting the key economic data from the U.S., including Building Permits, PPI, Housing Starts, and Industrial Production.  If today’s data coming from the U.S. also exceeds expectations, we may see new 2009 highs.  The next foreseeable stop to the topside past 2009 highs would be the psychological $75/bbl.  Although, this psychological level could prove to be a simple stepping stone in the path of crude’s ascent.  However, we should note that all of crude’s positive correlations have a negative inclination right now due the near-term downward pressure developed over the past few trading sessions.  Therefore, even though crude has a relative strength, gains could be restrained should the U.S. data miss expectations and result in a pullback in crude’s correlations.  We believe crude’s relative strength comes from a few sources:  Improvement in China’s economy, constrained production from OPEC, and a 900+ S&P.  Hence, even if the S&P should falter in the near-term, the first two factors could keep crude futures at a comparatively reasonable level.

Present Price: $72.36/bbl

Resistances: $72.37/bbl, $72.98/bbl, $75/bbl

Supports: $71.56/bbl, $70.72/bbl, $69.65/bbl

Psychological: $75/bbl, $70/bbl, $65/bbl.

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